The Coast Guard recently reached a milestone when it took delivery of the cutter Bertholf, the first ship in a new line of eight vessels known as National Security Cutters. The Bertholf, at 418 feet long, and named for the Coast Guard's first commandant, Ellsworth P. Bertholf, is the first ship to be delivered in the Coast Guard's deeply controversial "Deepwater" program, a 25-year, $25 billion modernization effort that will eventually update the fleet with 91 new ships, 195 aircraft, and state-of-the-art communications and computer systems. Deepwater was nearly swamped at its christening last year, when eight 123-foot patrol boats refurbished under the program were permanently scrapped because of buckling hulls. Deepwater is run by a joint venture of Lockheed Martin and Northrop Grumman called Integrated Coast Guard Systems.

A U.S. Navy inspection team brought in to evaluate the Bertholf found eight problem areas in the ship, but Coast Guard officials took delivery anyway, saying that the problems could be fixed. The Coast Guard operates one of the oldest fleets in the world, so it emphasizes the importance of receiving its first new high-endurance cutter in 36 years. National Journal Staff Correspondent James Kitfield spoke with the Coast Guard commandant, Adm. Thad Allen, about Deepwater and other issues. Edited excerpts from the interview follow.

NJ: Given problems with the Deepwater program in terms of quality control, production delays, and cost overruns, why accept delivery of the Bertholf after Navy inspectors flagged eight outstanding issues?

Allen: Taking delivery doesn't mean there aren't systems that still need tweaking, but it's like buying a house: Sooner or later you have to take occupancy. We feel that the best way to learn about the ship is to get a crew on board and assess its operational effectiveness while conducting actual missions. That way, over the next year and a half, the crew can work with the contractors to clear up any outstanding issues. I would also note that in general the inspectors' report on the Bertholf was very good. That's important, because we asked the Navy to bring their team of experienced ship inspectors in to run the evaluation. We wanted the assessment done by a third party that had no stake in the cutter, and we told them essentially to pull it through a knothole. And they commented quite favorably about the unique qualities the cutter will bring to the Coast Guard.

NJ: The Navy inspection team noted that the Bertholf was "a unique and very capable platform with great potential for future service." What are its unique capabilities?

Allen: Well, to begin with, it's over 400 feet in length, yet we can staff it with a smaller crew than our 378-foot cutters, primarily because the new ships are highly automated. These new ships will also have capabilities that their predecessors lack. For instance, some of the flight decks on ships in the Coast Guard fleet can accept only the H-60 helicopter, and others can receive only the H-65. The new cutters will have a common flight deck that can receive both types of helicopters, making them more interoperable with Navy H-60 helicopters. They will also have a helicopter-transfer system that shuttles helicopters on tracks into a hangar, reducing the requirement for crew members on the deck. Because of an automated firefighting system, the helicopters can also operate without having a firefighting crew on deck.

NJ: Do you attribute continued congressional skepticism about Deepwater to the controversy hanging over the program after you permanently decommissioned the eight retrofitted 123-foot patrol boats last year?

Allen: Yeah, that became a surrogate for all of Deepwater, because it was the lead item procured under the program. At that time we had $500 million a year to devote to the program, and that forced us to extend the life of some ships even while we were building new ones. Today, the annual budget for the program is up to $1 billion, which makes a big difference and probably would have dictated a different [purchasing] strategy. In any event, the extension of those 110-foot cutters into 123-foot cutters was a failure on a couple of fronts. First and foremost, we let our people down by giving them a first Deepwater ship that they couldn't trust because the hulls kept buckling. Our commanding officers actually praised the new electronics we put into the extended ships, but it was kind of like putting an XM satellite radio into a Model T--the radio works fine, but where can you take it?

After we made the very difficult decision to take those ships out of service, it became a litmus test of our perceived competence to manage the entire Deepwater contract, and [lawmakers] questioned the role we had assigned the contractors as the lead systems integrator. [A lead systems integrator, in Pentagonese, is a contractor that is given unusually broad authority to manage and make decisions about a weapons purchase, including choosing suppliers and deciding how to integrate the various hardware and software pieces into a whole weapons system.] That was a perfectly good question for Congress to ask, and indeed on taking the job as commandant I had already begun to ask myself whether we had correctly structured our program management organization.

NJ: Given that the Navy is also confronting a similar shipbuilding crisis as a result of massive cost-overruns and delays, what is your answer to the charge that the maritime services have ceded too much authority in ship design and program management to defense contractors?

Allen: In my view, that's a very significant issue that should concern everyone in Washington, because there is going to be a continued requirement to field very complex systems that integrate cutting-edge communications and information technology, so we'd better learn how to do this. Certainly a lot of people who looked at Deepwater felt that we had defaulted too many decisions and too much responsibility to the contractor team. When we first developed the concept of Deepwater back in the 1990s, however, we were constrained by both a relative lack of money and the advanced age of a fleet that was approaching block obsolescence.

That led us to try this very novel way of structuring the program. We made the private industry team the lead systems integrator for the program because we lacked the massive [weapons-buying] bureaucracy that exists in the [Pentagon] to assume that role. Unfortunately, we in the Coast Guard didn't adequately reorganize ourselves to interface with, and oversee, the contractor team. As a result, we disenfranchised our own naval engineers and ship designers, who felt that their voices were not heard and that they were left out of the decision-making.

At this point, we're in the process of transitioning the Coast Guard into becoming the lead systems integrator on Deepwater. In retrospect, I don't think making private industry the lead systems integrator was a bad idea, however, and even the [Government Accountability Office] said it will need to be looked at again in the future. You need to have the right capabilities to oversee that relationship, and enough people to manage it. We're positioning the Coast Guard now to be able to do that, which is why I'm feeling much better about Deepwater than I did a year ago. In the process, we're also becoming a better customer, and I meet regularly with the chief executives of Northrop Grumman and Lockheed Martin, which has greatly reduced any disconnects at the top. Someone once told me that there is no such thing as a $600 toilet seat. There are only $600 customers. Industry now has a new customer in the Coast Guard.

NJ: The number of homeland-security missions the Coast Guard has assumed since 9/11 has grown dramatically, but the number of Coast Guard personnel has stood at 40,000 for decades. How do you do it?

Allen: Well, I've told my commanders that I'm the only one in the Coast Guard still allowed to talk about "doing more with less." One reason the Coast Guard has been successful for so long is that we're a multi-mission organization in terms of both platforms and people. Part of our operational genius, I believe, is being able to prioritize missions, make trade-offs, and manage risk. As demand has grown and resources and capacities have stayed basically the same, however, we have steadily assumed greater risk in our decision-making. And I would like to start a national conversation about the fact that we're nearing the point where I think the Coast Guard is assuming too much risk in trying to allocate increasingly strained resources.

NJ: So how much bigger does your workforce need to be?

Allen: I'm always posed with that question, which is almost impossible to answer at this point. I can tell you that unless I'm given the resources to significantly increase the number of cadets and instructors at the Coast Guard Academy and Officer Candidate Schools, I'm constrained by my [officer training] pipeline to personnel growth of about 1,500 to 2,000 a year. What I propose is that we as a nation start buying down future risk by letting the Coast Guard grow by roughly those numbers annually, while at the same time we conduct a longer-range study of what the top line should ultimately be in terms of the Coast Guard's workforce. My bottom line is that we do not have enough people right now.

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